Ozzy Loans v New Concept & Zhong [2012] NSWSC 814

A borrower and guarantor (a director of the borrower) took out a loan at the behest of a fraudster, pursuant to an agreement whereby the fraudster promised to indemnify the borrower and guarantor against his failure to repay the loan. The fraudster was not a party to the loan or guarantee and failed to repay the loan. The borrower and guarantor defaulted under a registered second mortgage.

The borrower and guarantor claimed relief against the lender under the Contracts Review Act 1980, the National Consumer Credit Protection Act 2009 and on the basis of unconscionability.

Contracts Review Act
The court found that the loan was entered into for a business purpose and therefore both the Code and the Contracts Review Act did not apply. The court noted that the borrower made a declaration that the loan was for a business purpose which was effective despite references to the former code and the lender was not aware of, nor should have known anything about the true purpose of the loan, which in any event, was still a business purpose.

Unconscionability
The court denied the borrower/guarantor equitable relief because he lied about the true purpose of the loan and was not in a position of special disadvantage. The borrower was found to have received independent legal advice and to have no difficulty communicating in English despite it being his second language. The court accepted that the lender had no knowledge that the monies lent were for the benefit of the fraudster, having only dealt with the guarantor.

The court also refused to reduce the loan’s interest rate under the Code because it was not unjust.

The court gave judgment for the lender and an order for possession.

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